Baltimore Vacant Houses: Finally Progress and a Viable Plan!

Mayor Brandon Scott's administration and his Housing Commissioner Alice Kennedy seem to finally have found a recipe for reducing Baltimore's persistent blight of disinvestment and vacant houses, an issue that generations of mayors tried to tackle unsuccessfully.  

Vacant houses, a drag on Baltimore's
neighborhoods (Photo: Philipsen)

At least that was the impression one got listening to Baltimore's Housing Commissioner, Director of Finance and the President of the national organization MuniCap on Wednesday. The trio presented present the details of Scott's $3bn fifteen-year housing blight elimination plan to a rapt audience assembled in UMB's biotech center per invitation of the Lamda Alpha Land Economics Society LAI. Even retired former Housing Commissioner Graziano was impressed after quizzing the team with half a dozen or so technical questions about the workability of the innovative and nationally unique "non-contiguous" tax increment financing scheme (TIF). 

On the day of the presentation the DHCD dashboard displayed on the GIS-technology based CoDeMap showed 12,685  City registered VBNs (Vacant Building Notices). Even conceding that the number of vacants isn't an exact science (for one thing there are additionally around 20,000 vacant lots), this total is more than 20% less than the 16,000 vacant buildings DHCD had reported in 2015.

Officials from the City of Baltimore relied on technology to support their place-based intervention strategy. [..] CoDeMap, a mapping application that is based on [...] GIS. CoDeMap visualizes and analyzes housing needs in the city, neighborhood by neighborhood. CoDeMap also is a central point of access for [...] numerous databases with everything from citation data to a property's permit history. Launched more than five years ago, CoDeMap has evolved from a housing code enforcement tool to a platform that provides insights into housing, community development, and property datasets at the citywide, neighborhood, block, and parcel levels. 

In December 2023 when the Baltimore Mayor first announced his $3bn plan to eliminate vacant houses over 15 years, many yawned in spite of the giant dollar figure which encompassed 85% of Baltimore's total budget annual budget. They heard those promises before and with an instrument like a "non-contiguous TIF" there seemed to be a lot of pixie dust on this plan. Who had ever heard about this financing tool being used in totally disinvested areas on a lot-by-lot bases instead of a boundary defined area? Even that the Mayor stood with GBC and BUILD on his side, many Baltimoreans, jaded by past promises, were not convinced that this plan was real.

Baltimore Housing Commissioner speaking at a
LAI luncheon (Photo: Philipsen)

But a good year later the TIF has been approved, the first tranche of TIF bonds is about to be issued, the State has allocated money, and the block by block revitalization scheme is in full swing. Kennedy says $1.2bn of the needed funds have already been "committed".  And here they were, the money people, the Director Finance and the Municap man who advises municipalities across the nation on financial matters explaining in detail that this TIF was not fairy dust and that it was embedded in a larger strategy that DHCD has embarked on. 

For starters, the estimated total of $150 million TIF is not intended to pay entire projects but to finance the so called assessment gap that yawns between what a building costs to rehabilitate and what it could be sold for as well as infrastructure costs. The analysis showed that on average the appraisal gap is about $50k per building. With a total cost of doing the rehabilitation job estimated at $200,000, plus possible cost for infrastructure, the cost beyond the gap has to be covered by conventional loans and a mix of  City and State funds that Governor Moore promised in the total amount of $900 million, combining funds previously known as "project CORE" and BRNI ("Bernie"), guaranteed with a perpetual $50m minimum per year. 

The Mayor had not pulled the $3bn figure out of thin air or from the back of a napkin. For once, DHCD and experts had actually analyzed not only the problem (how the many vacants had morphed from "symptom of decline to driver of decline" through their impact on quality of life, surrounding housing values and Baltimore's property tax revenue) but also suggested a fix. Based on an assortment of studies they had performed detailed calculations of how much money it would take to fix the problem including buildings and infrastructure, in what sequence it could be done and, most importantly, what the funding sources could be. These studies, documents and institutions laid the groundwork, according to the Mayor's press release at the time:

Population loss comparison of industrial legacy cities
(From Whole Blocks-Whole City report)

Baltimore City / DHCD' (Framework of Community Development) czbLLC’s (Whole Blocks, Whole City Report and Analysis, prepared for BUILD) , MuniCap, Inc.,  CohnReznick, (TIF analysis), Johns Hopkins 21st Century Cities Initiative, (The Costs of Baltimore’s Vacant Housing), Econsult Solutions, (The Power of Residential Growth, for the Baltimore Development Corporation). Not mentioned in the press release is Joe Meyerhoff, a Baltimore based consultant who promoted the idea of non contiguous TIF bonds as a tool to fund the appraisal gap. 

I have written on this blog about Telesis and Sean Closkey's understanding of how to attack Baltimore's vacants problem in a systematic way which creates a ladder effect of values. Closkey now is part of ReBuild Metro which was an essential partner in the Whole City Blocks report. Principles of this approach include building from strength, working with communities and creating this stepladder of increasing value that would also allow the City to pay the TIF back. Usually, developers are on the line if the payback from incremental tax revenue increase doesn't develop as expected, there is also typically a special tax district applied to the TIF area. In this case the City can secure the first tranche with already rehabbed properties from the last two years created under "Vacants to Value", HCDC's longstanding program created under housing commissioner Graziano. Under Mayor Pugh and Young, the City had also developed a strategy for developing from strength in an attempt to bundle investment in "impact Investment Zones". This Framework has since been refined over time. 

Population loss was larger than household loss
(From Whole Blocks-Whole City report)

As Commissioner Kennedy explained, the funds to renovate cannot work in a vacuum but must be in an overall strategy which includes a strategic approach that is well coordinated with overall planning (DHCD hired several strategic planners), measures to expedite getting a clean title for vacant properties, block speculators form holding swaths of vacants through proper taxing and working through community centered and led vision plans. The history of the vacant house problem from Sandtown to Johnston Square shows that in some areas (Sandtown) the appraisal gap remained the same or grew while others managed to close it in a few years eliminating the need for subsidies (Barclay). 

The estimated upfront cost and payback over time (From the 
Kennedy presentation)

The value creation creates an ambiguous problem for existing homeowners: The assessed value of their homes goes up when a block has no vacant units left, welcome generational wealth creation but also an unwelcome tax burden, in spite of homesteading credits. The proposed solution: A one or two percent city sales tax that could reduce the property tax for every homeowner by $1000 if applied as a flat credit, would lower the tax rate for the average City homeowner ($150,00 home value) to near the tax levels of Baltimore County.  The sales tax suggestion which would align Baltimore with many peer cities, has been a legislative priority by the Scott administration during the last two legislative sessions in Annapolis but is a political longshot. .

Kennedy also noted that infrastructure frequently had been an overlooked problem that sank the cost calculations of many inner city rowhouse rehab projects. She mentioned the case of necessary alley widening that requires the relocation of electric poles, hundreds of thousands of dollars that distributed on just a few houses could make a project not viable unless infrastructure funds are set aside separately.  

From the audience came the question whether stormwater could be thought on a block or area level

Illustration of tax revenue occupied homes versus vacant ones
(Source, Meyerhoff slides)

instead of house by house, alluding to the new strict stormwater management requirements that are applied when new construction occurs on vacant lots. Kennedy said, stormwater mitigation is an issue that her department will be studying together with DPW and the parks department with the goal to create those synergies between new open spaces and new development. 

The innovative "non contiguous TIF"  approach has already drawn the interest from other cities, said Kennedy. The national ULI Magazine featured an article about it. Baltimore's successful violence reduction strategies also have created national interest recently. The last time folks came to Baltimore to study innovation was when Mayor O'Malley had implemented CitiStat. It is about time, we show America that government can, indeed, be effective. 

Klaus Philipsen, FAIA

Rehabilitated alley houses in Pigtown (Photo: Philipsen)

Previous articles on this Blog addressing the vacant house problem.

Who owns Baltimore's vacant houses and how to fix them up? (2024)

"Vacants to Value" becomes "Buy Into Bmore": More than just a name change? (2022)

One way to have fewer vacant rowhouses (2019)

Barclay's secret sauce of success (2017)

The universe and Baltimore's vacants (2017)

Can demolition of vacants add value? (2016)